THE PRINCIPAL COMMISSIONER OF INCOME TAX I vs. GUJARAT PAGUTHAN ENERGY CORPORATION PVT LTD

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TAXAP/456/2018HC GujaratGJHC24025293201807 May 2018Author: HONOURABLE MR. JUSTICE AKIL KURESHI,HONOURABLE MR. JUSTICE B.N. KARIA2 pages
AI SummaryDismissed

What did the High Court hold?

The High Court dismissed the Revenue's appeal. The Court referred to its previous observations in Tax Appeal No. 655 of 2012 concerning the same assessee and the issue of netting of interest under Section 80IA. In that prior case, the Court had relied on the Supreme Court's decision in ACG Associated Capsules Pvt. Ltd. vs. Commissioner of Income-Tax, which held that for Section 80HHC, only the net interest, excluding expenditure incurred in earning such interest income, should be excluded. The High Court opined that the same principle would apply to deductions under Section 80IA. Therefore, the Tribunal had committed no error in allowing the claim for deduction under Section 80IA by permitting the netting of interest.

What were the facts?

The Revenue, Principal Commissioner of Income Tax I, filed an appeal against the order of the Income Tax Appellate Tribunal (ITAT) dated June 27, 2017. The appeal concerns Gujarat Paguthan Energy Corporation Pvt Ltd. The core issue revolves around the netting of interest for the purpose of disallowance under Section 80IA of the Income Tax Act, 1961. This issue had previously arisen for the assessee in an earlier assessment year, in Tax Appeal No. 655 of 2012. While that appeal was admitted on other grounds, the High Court made observations regarding the netting of interest.

What were the issues?

1. Whether the Appellate Tribunal has erred in law and on facts in allowing the claim for deduction under Section 80IA of the Income Tax Act, 1961, by permitting the netting of interest. Assessee's Contention: The judgment does not explicitly record the assessee's contentions. However, the context implies the assessee argued for the netting of interest in line with the High Court's previous observations. Revenue's Contention: The Revenue contended that the Tribunal erred in allowing the deduction under Section 80IA by permitting the netting of interest, implying that such netting should not be allowed or should be done in a different manner.

Which sections of the Income-tax Act were involved?

Section 80IA,Section 80HHC

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
C/TAXAP/456/2018 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 456 of 2018 ========================================================== THE PRINCIPAL COMMISSIONER OF INCOME TAX I Versus GUJARAT PAGUTHAN ENERGY CORPORATION PVT LTD ========================================================== Appearance: MRS MAUNA M BHATT(174) for the PETITIONER(s) No. 1 for the RESPONDENT(s) No. 1 ========================================================== CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI and HONOURABLE MR.JUSTICE B.N. KARIA Date : 07/05/2018

ORAL ORDER (PER : HONOURABLE MR.JUSTICE AKIL KURESHI)

1.

Revenue is in appeal against the judgment of the Income   Tax   Appellate   Tribunal   dated   27.06.2017 raising following question for our consideration: “Whether   the   Appellate   Tribunal   has subsequently erred in law and on facts in allowed the claim for deduction u/s.80IA of the the Income Tax Act, 1961?”

2.

Issue   pertains   to   netting   of   interest   for disallowance under section 80IA of the the Income Tax Act, 1961. This issue came up for consideration in case of this very assessee in the earlier assessment year in Tax Appeal No.655 of 2012. The question was not maintained, though appeal was admitted for some other   question.   The   Court   made   following C/TAXAP/456/2018 ORDER observations:

“2. [2012]   343   ITR   89   (SC)  such   issue   in   the context of deduction under Section 80HHC of the Act has been settled. It is held that it would   only   be   the   net   of   the   interest excluding   the   expenditure   incurred   in earning such interest income which should be excluded for the purpose of under Section 80 HHC   of   the   Act.   To   our   mind,   same   would apply   even   when   the   revenue   desirous   to exclude   certain   interest   income   from   the deduction   available   under   Section   80IA   of the Act. In our view, the Tribunal committed no error.”

3.

In the result, Tax Appeal is dismissed. (AKIL KURESHI, J) (B.N. KARIA, J) ANKIT SHAH

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